The Sensex lost 454 points in early trade today following its Asian peers which tanked over 6% after US President Donald Trump threatened to impose more tariffs on China, spooking investors who had been expecting good news on trade.
Nifty too fell 127 points to 11,535 level today reflecting the negative development in trade relations between US and China. However, the fall in Indian benchmark indices was lesser compared to their global peers.
Trump in a tweet said he would raise import taxes on $200 billion in Chinese products to 25% from 10%.
The new warning sent Asian stocks tumbling with Hang Seng sinking 1,125 points or 3.7% to 28,956 level. China's Shanghai Stock exchange fell 6.44% or 198 points to 2,879 level.
Markets were closed in Japan. The future contract for the Dow Jones Industrial Average fell 1.9% to 25,996.00, while that for the S&P 500 also shed 1.9%, to 2,892.00.
Shares also fell sharply in Taiwan, Singapore, Australia and Indonesia. US officials had indicated that progress had been made with China at trade talks in Beijing last week and expressed hope that a deal would be reached by the end of this week.
But Trump's sudden tough stance on tariffs spooked investors worldwide. Trump's comments come ahead of a Chinese delegation was about to resume talks in Washington on Wednesday.
The US President's hard line has put those negotiations in jeopardy with multiple reports suggesting that China was considering to cancel the high-level trade talks with the US. That could send global markets into a tail spin.
"The risk for (Trump) is that the Chinese don't play ball and don't go ahead with the negotiation," Shane Oliver, head of investment strategy at AMP in Sydney told Reuters. "It's not in his interest for shares to go down as it would hit U.S. business confidence and investment, and that would shoot up unemployment. And that would be a risk for his re-election, too," he said.
"Arguably, Trump's threat to lift tariffs 'shortly' if Beijing does not play ball on US trade demands, may be more a negotiations tactics than an imminent trade action," Mizuho Bank said in a commentary.
"Nonetheless, Trump's tweet allusions to tariffs being 'partially responsible for ... great (US) economic results' does raise the threat of misguided trade policy" from the US, it said.
Markets Live: Sensex pares losses, trading 275 points lower; Nifty at 11,625; Tata Motors, Tata Steel, YES Bank top losers
Edited by Aseem Thapliyal